Category: Mortgage

UK households have been told they can cut their mortgage bill to just £330 a month – if they act decisively and DOWNSIZE. Mortgage holders can get their monthly payments cut from over £700 to £300 by picking the right property.

Speaking to the Guardian newspaper, a string of couples who have made the bold move have spoken out over the savings they have been making. Richard Wise moved from London to Margate, and slashed his costs, while a 50-year-old in Edinburgh cut her fixed-rate deal on a five-year mortgage to £330 a month – down from a variable tracker which was costing £750.

“It’s more a fear of what could happen,” she said. “I was a teenager when mortgage rates went crazy … and so I’m worried about those kind of scary figures and [rates] going out of control with the current government. With everything increasing, it feels like one piece of the puzzle we can have control of.”

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Other lenders also offer low deposit deals aimed at young buyers – and experts caution those with a high loan-to-value ratio should try to overpay to reduce the risk of getting into negative equity.

First-time buyers are being offered the chance to pay a modest £5,000 deposit and potentially borrow up to 99% of a property’s value.

The mortgage from Yorkshire Building Society is valid on places up to £500,000 and comes without a fee – but there are a few key exceptions.

It’s not available for flats or new-build properties and would-be borrowers must pass strict affordability and credit scoring checks.

The task of saving for a deposit is one of the barriers that many first-time buyers struggle with as most lenders like a minimum 10% up front.

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When people buy a home they tend to think they are making a sound investment, as prices tend to rise in the long run.

But unless they are a cash buyer, they require a mortgage from a lender in order to purchase a property.

They will then spend decades repaying that mortgage, with a large portion of their monthly payments going on interest.

While it’s easy to know how much they’ve made from house price growth when they come to sell, homeowners usually pay less attention to how much the mortgage has cost them in the meantime.

With mortgage rates having risen over the past two years, it means the total amount paid back is more likely to have superseded any gains made by house price growth during that time.  

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Mortgage rates have fallen below 6% on average, but borrowers must still grapple with higher costs to get on or move up the property ladder. 

Last year, customers saw mortgage pricing hiked by consecutive increases to the base rate, as the Bank of England (BoE) attempted to tackle chronically high inflation levels.

But recently, there has been a “plateau” in interest rates, said Forbes Advisor, made possible in part by “continued cooling inflation”. The latest figures show inflation dropped from 4% in January to 3.4% in February. In addition, at the end of March, the Bank of England once again kept interest rates unchanged “as was widely expected”, the website added. 

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A bank is increasing the maximum term it offers on interest-only mortgages to 40 years.

From Tuesday April 9, it will increase the maximum term on interest-only mortgages to bring it in line with its capital and repayment deals, up from 25 years.

Under the shake-up, customers applying for an interest-only mortgage, who also intend to sell their property later as their way to repay the mortgage, must have at least £300,000 equity in the property. Previously this was £250,000.

The bank will also make other updates to its affordability calculations, due to changes coinciding with the new 2024-25 tax year.

Santander will take child benefit into account for those earning up to £60,000 following the increase to the high income child benefit charge threshold, as well as the reduction in national insurance contributions for PAYE (pay as you earn) and self-employed applicants, enabling people to borrow more.

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Lenders are accounting for a 22 per cent increase in expected credit loss provision as mortgage defaults spike, analysis from Fuse has found.

The analysis, which looked at the most recent financial statements of 10 of the UK’s largest mortgage lenders, found lenders are accounting for ECL exceeding £760mn this year.

This is an increase on the £625mn in the previous year.

The research revealed that seven of the 10 lenders reported an increase of more than 10 per cent in their ECL provision and just one reported a reduction in ECL allowance. 

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Since mortgage rates began rising, many of the nine million mortgaged households in the UK and close to two million landlords have been faced with the prospect of much higher payments.

Before that, many had become accustomed to ultra-low interest rates for more than a decade.

In this six-part series, we look at how much more people are really paying when they take out a new mortgage, how households are coping and if a mortgage crisis is afoot.

Previously, we looked at how much more people are paying for new mortgages compared to the cheaper deals many are rolling off.

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The high proportion of UK homeowners on fixed-rate mortgages means the Bank of England should be wary of keeping interest rates too high for too long, the International Monetary Fund has warned.

The IMF said many borrowers had been sheltered until now from the impact of higher interest rates and there was a risk of declining consumption, house price falls and increasing defaults as tighter policy finally had an impact.

Although the chapter from the Washington-based body’s forthcoming world economic outlook does not single out any individual central bank, the study shows that the UK has one of the highest proportion of fixed-rate mortgages, after a sharp increase in their popularity in the decade leading up to the start of the Covid-19 pandemic.

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Mortgage rate rises in the UK are easing in an “encouraging sign” for homeowners, according to experts.

The average interest rates on overall two and five-year fixed deals rose from March to April but more modestly than the month before, according to research by Moneyfactscompare.

Despite this slight hike, this mortgage rate rise remains lower compared to the average reported for January 2024.

Between the beginning of March to early April, overall average two and five year fixed rate mortgages jumped to 5.80 per cent 5.39 per cent, respectively.

Currently, the average two-year rate deal is higher 0.41 per cent than the five-year equivalent, Moneyfacts found.

As well as this, the average standard variable rate (SVR) remained at 8.18 per cent which is just below the highest recorded between November and December 2023.

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